More than 5 million in Pa. live in financially distressed municipalities

By ERIC BOEHM, PA Independent

Sunday, April 14, 2013

HARRISBURG — More than 5.2 million Pennsylvanians — about 41 percent of the state’s 12.6 million inhabitants — live in a city, township or borough facing some form of financial distress.

And civic leaders warned on Monday that things are probably going to get worse before they get better.

Ed Pawlowski, mayor of Allentown, said municipal pension costs are eating a hole in his budget. Costs rose from $6 million last year to more than $18 million this year and will climb to $31 million within a few years. By 2015, fully 30 percent of Allentown’s budget will pay for benefits to retired city workers, police officers and firefighters, he said.

“Unless we fix this problem, we’re going to see cities across this commonwealth fall like dominoes on a board,” Pawlowski said. “It’s going to collapse in on itself and pull down every other city in the state.”

It’s already started in many places, mostly older urban cores like Reading, Scranton and Johnstown — along with the more than 20 other municipalities governed by the state’s Act 47 program for restructuring financially unstable towns.

More than 5 percent of Pennsylvanians live in Act 47 municipalities, according to the Coalition for Sustainable Communities, a group of business and civic leaders calling for changes that include reforms to municipal pension plans.

When you add in the 21 percent of state residents living in cities with pension-caused financial distress and 15 percent living in municipalities that fall into the state’s “stress index” — a type of early warning system for financial issues — it amounts to more than 4 out of every 10 Pennsylvanians’ hometowns facing trouble down the road.

And that trouble will extend to places that are not included on any list of distressed communities, according to Carlisle Borough Council President Perry Heath. “We know increasing pension costs will require higher taxes or cuts in services.”

In turn, those higher taxes and lower levels of municipal services will make it less likely for existing businesses to prosper and new ones to re-locate or start, business leaders warned.

State Rep. Seth Grove, R-York, pitched his plan to restructure municipal pension plans for police and firefighters on Monday, which he said was part of the solution for troubled towns.

He has proposed placing new hires into a new pension plan and ending loopholes that allow pension “spiking” by working overtime and counting unused vacation pay. Current workers would retain their current benefits and pensions.

But by freezing the current pension plans, the bill would change the collective bargaining process between municipalities and the unions representing police and firefighters. That’s likely to bring those unions out in opposition to the measure, though they have not officially weighed in so far.

Eric Boehm is a reporter for PA Independent, an independent news service covering state government in Harrisburg. He can be reached at Eric@PAIndependent.com